Should the Duluth, Minn.-based utility Minnesota Power continue to invest in its aging fleet of coal-fired electric plants or could that money be better spent on alternatives such as natural gas and wind energy?

Regulators weigh cost of coal

The Minnesota Public Utilities Commission on Thursday will consider whether Minnesota Power’s oldest coal-fired power facilities, including a 45-year-old unit at Taconite Harbor in Schroeder, should be closed. (Submitted photo)

PUC mulls pulling plug on aging plants

Over the last six years, Minnesota Power has spent $355 million to bring its aging fleet of coal-fired electric plants in line with modern environmental standards.

The question now: Should the Duluth, Minn.-based utility continue to invest in the facilities or could that money be better spent on alternatives such as natural gas and wind energy?

The Minnesota Public Utilities Commission on Thursday will explore that divisive question, and observers say the result could indicate whether the state will pick up the pace in moving away from coal.

The issue is being raised as the PUC looks at Minnesota Power’s “baseload diversification study.” The study was ordered by regulators last year so that they could better understand the cost of operating the utility’s coal-fired generators amid rising coal prices and stricter emissions standards.

Minnesota Power is the first company to submit such an analysis to the state, but two other utilities, Fergus Falls-based Otter Tail Power Co. and Interstate Power & Light, are expected to submit studies in November.

Regulators in the Minnesota Power case are taking a particularly hard look at the utility’s oldest and smallest coal-fired generators.

Minnesota Department of Commerce officials say they believe it will be more cost effective to replace two 59-year-old units at the Laskin Energy Center, in Hoyt Lakes, and another 45-year-old unit at the Taconite Harbor, in Schroeder, with wind power and natural gas.

The department is calling for the units to be taken offline by 2016, and for another two coal-fired generators in Cohasset to be retired by 2020.

Ratepayers could spend $123 million to $453 million to continue operating Minnesota Power’s older coal units through 2034, according an analysis done by the Department of Commerce’s Division of Energy Resources.

Executives at Minnesota Power, which serves 144,000 retail customers over a 26,000 square mile territory, say they are committed to moving away from coal. But they envision a slower, more deliberate transition, and say more study is needed.

Company officials hope the PUC will wait until a more thorough analysis is submitted in April. That analysis, they say, will do a better job outlining the costs of meeting environmental regulations.

Information about the cost of upgrades has been withheld by Minnesota Power for competitive reasons, but the April filing will include specific costs, said Amy Rutledge, a spokeswoman for Minnesota Power.

The company also wants to better articulate the socioeconomic impact of closing the coal facilities. Around 100 employees work at the generators the Department of Commerce says should close by 2016.

“From our perspective, we think it [the baseload study] is a great tool, but that more information needs to be clearly understood before me take any definitive action,” Rutledge said on Wednesday.

The utility gets 85 percent of its power from coal now, and is adding more wind and hydro power to its portfolio. The plan is to reduce coal reliance to 50 percent by 2025.

Whether or not the baseload study can be used to justify closing the coal plants also remains in dispute.

Minnesota Power, the Minnesota Chamber of Commerce and a group of mining companies that consume the bulk of the utility’s power say it shouldn’t be used as a “tool for final decision-making.”

Because this is the first time the PUC has ordered such a study, it remains unclear how the agency will move forward if commissioners decide the coal facilities should be shut down according to the Department of Commerce’s timeline.

PUC spokesman Dan Wolf said one way of forcing their closure could be denying future rate increases to pay for upgrades.

Environmental advocates say Minnesota Power’s call for more time is simply delaying the inevitable.

“It’s a mystery to me why this company is not taking a harder look at the options that are available to them when there are cleaner and less costly options than running these coal plants,” said J. Drake Hamilton, the science policy director for Fresh Energy.

The St. Paul-based group, along with the Sierra Club, the Izaak Walton League of America, and the Minnesota Center for Environmental Advocacy have all lobbied in favor of shutting the coal generators down.

More than half of the electricity generated in Minnesota last year came from coal, but Hamilton and others say that dependence is destined to fade as coal deposits become harder to reach, emissions rules become more stringent and the price of renewable energy falls.

The changing economics led leaders of Rochester Public Utilities on Tuesday to decide that their coal-fired power plant, the state’s oldest, should be brought offline by 2015. The utility will buy electricity from the open market instead.

Xcel Energy will cease coal operations at its Black Dog plant in Burnsville in 2015 because of costly emissions regulations and is taking a hard look at its Sherburne County Generating Station in Becker, which burns 30,000 tons of coal daily.